Project Planning & Scheduling

Unit 5

Unit 5

Project Time & Cost Management

Structure: 5.1 Introduction Objectives 5.2 Recall planning process for managing time 5.3 Define the process of selecting activities and sequencing them Selection of project activities Sequencing the project activities 5.4 State the process for estimating resources and duration of the activity Determine resource requirement for each activity Calculating the time required for each activity 5.5 Define the schedule development process 5.6 Recall planning process for managing cost Calculate cost of the project Create budget for the project 5.7 Summary 5.8 Terminal Question 5.9 Answers to SAQs and TQs

5.1 Introduction
As mentioned in the earlier units planning and managing the constraints of the project is very crucial project management task. Interestingly there is a relation between time and cost as well. When a project estimated to be completed in X days has to be completed in Y days, where Y is less than X. It becomes important to add some extra resources and complete the project timely, this call for extra cost. Thus we see if time is reduced cost increases and vice-versa. By planning for time and cost we mean planning the time taken to complete a project activity. And planning for the cost part of the activity, which is the cost to be incurred for the completing activity. Like other knowledge areas of project management, these two knowledge areas also imply various processes for successful planning. In this unit we will provide a detailed description of the various processes which help project manager plan for cost and time factors.
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Objectives: After reading this unit, you will be able to: Understand planning process for managing time. Define the process of project activities selection and sequencing. . State the process for estimating resources and time duration for the activity. Define the steps to schedule development Understand planning process for managing cost. Explain the method to estimate cost and create Budget. Explain how to control cost.

5.2 Recall planning process for managing time

Project time management processes in the planning process group includes processes which are required for timely completion of the project. The processes in the time management group are: Defining project activities Sequencing the selected activities Estimating resources requirement for the project Estimating the time duration for each activity Creating schedule. Controlling schedule Although these processes are listed here as iterative element, they are linked to every other process. These processes play an important part in the creation the project schedule, which is the blue print of the entire project. The processes create an outline of the tasks to be accomplished for successful completion of the project. The schedule creation uses the bottom-up methodology, as this eases the planning process. Self Assessment Questions: I 1. The basic technique used for planning time duration for the various tasks in project management is ____________. 2. List the various planning process group projects which are used for time management.

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5.3 Define the process of selecting activities and sequencing them

The planning processes which help in listing the activities of a project are : Selection of project activities Sequencing of project activities Before explaining the two processes, let us understand some general elements of this process: Deliverables: is a term which is used for tangible or intangible object, which is a result or a project or a phase. Deliverables can be for the client or for a separate department/ unit of a project team. Work package: It is the lowest level of deliverable for a project, defined in the work breakdown structure. It is the outcome of a set of activities Activity: is an individual task accomplished for project progress and contributes to project deliverables. Milestone: are significant events within the project schedule, which help manage project progress.

5.3.1 Selection of project activities This is the process of decomposing the project into individual task, which are to be performed for project progress to its objectives and is an important step for meeting project scope. It helps identify the specific action to be performed for project deliverables. These activities act as a basis for estimating, scheduling, executing and monitoring and controlling the project work. Like all processes have some basic requirements or inputs and certain outcome, activity identification has a set of inputs and outcomes. Also to convert these requirements into a prominent outcome, we require some methods, tools. For identifying the activities it is very important to have certain project data, which are: Scope Baseline: this is the component of project plan which gives information about the project scope, listed in the scope statement, lists the work breakdown structure and description of the WBS elements.

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Enterprise environmental factors: Information about organizational culture, processes, infrastructure, government standards, human resource data, PMIS, stakeholder information etc. Organizational Assets: this includes all process related assets, which an organization captures, which can impact project success. This can range from organization policies, procedure, processes to knowledge base created from previous project experiences.

As mentioned previously, to identify the activities with the help of the information listed above, we need some tools and techniques, which are: Decomposition: this technique is about breaking project work packages into smaller more easily manageable units. Rolling wave planning: this is a technique which plans as and when the project unfolds. In this technique the plans are made with the upcoming events Expert Judgment: Although the techniques listed above are appropriate for identifying the project activities, but an experienced and skilled expert can help finalize the most appropriate activities.

The major outcomes of this process are: List of activities: This is a consolidated list of activities to be performed for project accomplishment. This list also contains description of the work that each activity would perform. Activity Characteristics: This output provides a description about the activity, which includes activity ID, name, predecessor activity, successor activity, logical relationship, leads and lags, resource requirement, dates of execution of the activity etc. Milestone list: This list contains the details of the upcoming events of the project. The milestones listed in this output may be mandatory or optional.

5.3.2 Sequencing the project activities As far as activities are concerned, only identifying them will not be of much help for the project. It is very important that they are sequenced in the correct fashion. This process performs the second action in the process group for time management. As mentioned before the basic information/ data required for activity sequencing are:
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List of activities: Already defined in the Sec. 5.3.1 Activity Characteristics: Defined in Sec. 5.3.1 Milestone List: Defined in Sec 5.3.1 Scope Statement: This document contains a detailed description of the project scope, project requirements, product characteristics etc. Organizational Assets: Defined in Sec 5.3.1

The tool and methodology required for utilizing the information listed above and creating a valuable outcome are: Precedence Diagramming Method (PDM): is a method for constructing project schedule network diagram that has rectangular boxes, depicting nodes and arrows connecting the boxes, depicting the logical relationship between the activities. this technique is also called Activity on Node (AON). Activity 01 Activity 02 Activity 03

Node
Fig. 5.1: Activity on Node

Applying Leads and Lags: a lead allows an acceleration of the successor activity and a lead directs a delay in the successor activity. They are tools used to give a more logical touch to the schedule logic between the activities. Dependency determination: this technique is used to define the sequence based on the types of dependencies between the activities. Schedule Network Template: These are templates which are used to accelerate the process of preparing network diagram.

The major outcomes of this process are: Project Schedule network diagram: They are symbolic display of project activities and the logical relationship between them. Project document updated: some of the project documents which need to be updated may include List of activities, activity characteristics, and risk register.
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Self Assessment Questions: II 3. List the inputs for activity sequencing process, which are outcome from a previous process. 4. Why is precedence diagramming technique also called AON?

5.4 State process of estimating resources and duration for the activity
As we are already aware that for every step we take has a time frame and every move needs some resource and both these parameters need to be considered before each action. Thus even though the activity is identified and sequenced, we get only partial schedule, to get further clarity on the schedule it is very important to understand the resource requirement and time required to complete each activity. The importance of the two parameters can be understood from the fact, that project management has two separate processes for find the two requirements. The two processes are : Determining resource requirement for each activity Calculating the time required for each activity 5.4.1 Determining resource requirement for each activity There are various resources used on a project. Some of which are people, machinery, money. And for each activity, to be accomplished we have a particular resource requirement. The reason for calculating this requirement is, that there is a cost factor attached to each resource and to execute the project successfully, it is very important that we are aware of the cost component. The information or input to this process may be similar or different form the previous processes. The basic inputs to this process are: List of activity: Defined in Sec. 5.3.1 Activity Characteristics: Defined in Sec 5.3.1 Resource Calendar: this document gives us an idea of the resource availability for the project activities. It also gives information about the resource skillset. Enterprise Environmental Factor: Defined in Sec. 5.3.1 Organization Asset: Defined in Sec 5.3.1

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To use this information and determine the resources for each activity, we require the methodologies and tools listed below: Expert Judgment: Defined in Sec 5.3.1 Alternative analysis: There may be two or more ways to doing a particular task. Through this scrutiny, we try finding an alternative mode of accomplishing a task. And this may require a different set of skills, which can help incase of unavailability of the resource for the first set of activity and may save cost as well. Pre-stated estimating information: This includes production or resource rates pre-stated by the organization. Bottom-up Estimating: Incase the activity is complicated enough for determining the resource requirement; it can be further decomposed into the detail of the work to be performed. And resource requirement for the detailed work is determined. This way of calculating resource requirement for an activity by deriving the resource requirement for its sub-parts is called bottom-up estimating. Project Management Software: several soft wares for project management are available which assist in planning and managing resource requirements for the various tasks in a project.

The outcomes of this process are: Activity Resource Requirement: This document lists the types and quantity of resource required for project activities. It also list the skillset required and quality of material required and other characteristics of the resources. Resource Breakdown Structure: It is the hierarchical structure of the resources required for the project activities, further categorizing it on the basis of their types. It help project manager in maximum utilization of the resources and make sure no resources are wasted. Project document updated: Defined in Sec 5.3.2 5.4.2 Calculating the time required for each activity Once we have the calculated the resource requirement based on their availability, we can get idea about the time it would take to complete the activity. In this process we use outcomes from previous processes and organizational documents to calculate the time taken for each activity. The major inputs required for this process are:
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List of activities: Defined in Sec.5.3.1 Activity Characteristics: Defined in Sec.5.3.1 Activity Resource requirement: 5.4.1 Resource Calendar: Defined in Sec.5.4.1 Scope Statement: Defined in Sec.5.3.2 Enterprise environmental factors: Defined in Sec.5.3.1 Organizational Asset: Defined in Sec.5.3.1

The tools and techniques used for calculating the time duration of each activity ion a project are: Expert Judgment: Defined in Sec.5.3.1 Analogous estimating: this estimating technique uses information from previous similar projects to calculate the duration. This methodology is cost effective and time saving but the result may not be very accurate. Parametric estimating: this technique uses historical data, i.e. information from similar previous projects and relationships between variables. This technique is more accurate then the analogous estimating. PERT (Program evaluation and Review Technique) Estimate: also known as three-point estimate, is more accurate then the estimating techniques mentioned before. This estimate is calculated using the following formula: Expected activity Duration (tE) = (tO + 4tM + tP)/6 Activity standard deviation tD = (tP - tO)/6 Activity Variance = tV = (tP- tO)2/6 The range of duration can be calculated : tE +or - tD Where tO Optimistic or activity duration in best scenario. tM Most likely or activity duration resource availability and dependencies are as assumed tP Pessimistic or activity duration in worst scenario.

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Reserve Analysis: contingency reserves or buffer may also be included in the schedule accounting for uncertain schedule.

The major outcomes of this process are : Activity Duration estimate: This gives an approx. figure of the duration of activity. It may be a rough figure or a range, between which the duration may be present. Project document updated: Defined in Sec.5.4.1

Self Assessment Questions: III 5. Fill in the blank: The estimating technique which is completely based on mathematical relationship between key variables is __________ 6. Numerical: complete the chart using the PERT formulaes: Activity Activity-01 Activity-02 Activity-03 Activity-04 Activity-05 Pessimist 10 25 48 46 98 Most-likely 5 16 44 22 76 Optimist 3 9 39 15 54 PERT

the

5.5 Define the schedule development process

This is one of the most important parts of schedule creation. In this stage we analyze the activity break-up and sequence and resource and duration requirement, identified in the pervious processes and put all this together to create schedule. This is why all the inputs in this process are from the previous processes, described above. The major inputs required for schedule creation are: List of Activity : Defined in Sec. 5.3.1 Activity Characteristics: Defined in Sec. 5.3.1 Project Schedule Network Diagram : Defined in Sec. 5.3.2 Activity Resource Requirement : Defined in Sec. 5.4.1
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Resource Calendar : Defined in Sec. 5.4.1 Activity duration estimate: Defined in Sec. 5.4.2 Scope statement: Defined in Sec. 5.3.2 Enterprise environmental factors : Defined in Sec. 5.3.1 Organization assets: Defined in Sec. 5.3.1

The tools and techniques used for schedule creation are: Schedule Network analysis: This technique employs other techniques like CPM, resource leveling, what-if analysis to create schedule. Critical path method: This technique is used to calculate early start, late start, early finish and late finish for the project activities. These parameters give the range within which the activity can be scheduled. Critical chain method: Although this is misunderstood as CPM, is actually a network diagram analysis technique used to modify the schedule to make use of minimum resources for accomplishing the project tasks. Resource Leveling: This technique can be used when we do not have complete availability of resources required for the project. This activity is usually carried out after critical chain method is already applied. This may lead to a change in the original critical path What-if Scenario analysis: This technique is used for comparing the different scenarios based on the given schedule. And then the most feasible solution is applied. This is mainly used to check the feasibility of the schooled under adverse conditions. Applying Lead and lags: Defined in Sec 5.3.2 Schedule compression: Due to certain constarints, it is sometimes required to shorten the schedule, but the project scope cannot be changed. This technique is used in such cases. Schedule compression technique includes: o Crashing o Fast tracking

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Scheduling tools: Several software tools are available in the market, which allow accelerated schedule creation with information about activity resources and duration and sequence.

The outcomes of this process would be: Project Schedule: this structured document gives us the start and end date of each activity. It gives a detailed description of the activities to be performed in the project, their dependencies and requirements. They can be represented in the following format: o Milestone chart o Bar charts o Project schedule network diagrams Schedule Baseline: This is a version of schedule, approved by project management team, with the baseline start and end date of the project. This is a part of the project management plan. Schedule Data: Is the information about schedule milestones, activities and their characteristics, assumptions made and constraints. Project Document Updated: Defined in Sec 5.3.2

Self Assessment Questions: IV 7. True and False: Critical path method and critical chain method are two names for the same technique. 8. Fill in the blanks Crashing and fast tracking are two methods of schedule __________.

5.6 Recall planning process for managing cost

Just as time is an important parameter for measuring project performance, cost plays a crucial part in managing project performance. Each and every action and element of a project is attached to a cost factor. Thus for a successful project execution, it is very important to plan for the cost part of the project. The major planning processes which help plan cost are: Calculate Cost of the project Create budget for the project

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Most of the outcomes of the cost process would serve as an input for creating budget. 5.6.1 Calculate Cost of the project This process of the planning process group helps get an approx. idea of the monetary resource required for accomplishing the project. The quantity of this resource required is generally expressed in some currency. The major input required for calculating the cost of the project are: Scope Baseline : Defined in Sec. 5.3.1 Project schedule : Defined in Sec 5.5 Human Resource plan: this subsidiary plan of project management plan gives information about resource staffing and human resources labor charges and reward and recognition policy. Risk register: is document which lists the identified risks, risks which have already occurred in similar projects in the past, and cost involved in risk mitigation. Enterprise environmental factors : Defined in Sec 5.3.1 Organizational asset : Defined in Sec. 5.3.1

The tools and techniques used for estimating cost of the various activities and in turn the entire project are: Expert Judgment: Defined in Sec 5.3.1 Analogous estimating: Defined in Sec 5.4.2 for activity estimating. Same needs to be used for cost estimating. Parametric estimating: Defined in Sec 5.4.2 for activity estimating. Same needs to be used for cost estimating. Bottom-up estimating: Defined in Sec 5.4.2 for activity estimating. Same needs to be used for cost estimating. PERT or three point estimating: Defined in Sec 5.4.2 for activity estimating. Same needs to be used for cost estimating. For cost the variables will become : CO optimistic or cost of the activity in best scenario CM Most likely cost or activity cost based on realistic effort assessment
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CP pessimistic cost or activity cost in worst scenario. And formulae would be Expected activity Duration (CE) = (CO + 4CM + CP)/6 Reserve analysis: Defined in Sec. 5.4.2. Cost of Quality (COQ): like all other factors certain cost is attached to quality and the exact cost for quality cannot be calculated. Thus a small part is assumed and while estimating cost, it is necessary to add this assumed portion as well. Vendor bid analysis: A portion of the cost is also based on the bid responses and bids made by selected vendors. For estimating a correct cost, it is necessary to analyze the bids responses of the selected vendor.

Finally the outcome of the project which is components of cost estimate would be: Activity Cost estimates: They are measurable calculation of the feasible cost required to complete project work. Basis of estimates: this includes information about how cost was estimated, assumptions made while estimation, constraints in the estimation process and possible range within which the estimated cost would lie.

5.6.2 Create budget for the project As the approx. cost of the project is already estimated, now its time to cumulate the costs of all the activities of the project and create an approved cost baseline. This approved cost baseline will be the estimated cost minus the management reserves. The information required for determining the budget are: Activity cost estimate : Defined in Sec. 5.6.1 Basis of estimates : Defined in Sec. 5.6.1 Scope Baseline: Defined in Sec. 5.3.1 Project schedule: Defined in Sec. 5.5 Resource Calendar : Defined in Sec 5.5.4.1 Contract: This document provides information regarding the contract under which project was received, the cost factors.
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Utilizing the information listed in the documents described as inputs, and tools and techniques mentioned below, we can get an appropriate budget designed. Tools and techniques used are: Cost Aggregation: Are aggregated cost per work package, as per the WBS. Similarly cost for work packages are aggregated for higher level elements. Reserve analysis: Defined in Sec 5.4.2 Expert Judgment: Defined in Sec. 5.3.1 Historical Relationships: This includes data from previous project which have been used in parametric estimation or analogous estimation techniques resulting in scientific model for forecasting entire project cost.

The inputs and tools and techniques listed above help is the following outcomes, which are components of the budget or impacts of budget creation: Cost performance Baseline: is an approved budget at competition, which is used for monitoring and controlling cost and cost variances. Project Funding Requirements: this document describes the forecasted expenditure and liabilities and reasons proving the need for funds. Project Document Updated: Defined in Sec. 5.3.1 Self Assessment Question : V 9. All of these are outputs of estimate budget process except Cost performance baseline project funding requirements project document update Activity cost estimates 10. Calculate the PERT cost of the activities and complete the table below: Activity Activity-01 Activity-02
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Pessimist $1,000 $200

Optimist $850 $175

Most likely $700 $90

PERT

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5.7 Summary
In this unit we have learnt: Time and Cost are two important factors to be monitored and controlled for project success through out the project. Project time planning processes is about identifying the project activities, sequencing them, calculating the resource and time requirement for the activities and defining a schedule. To accomplish the process objectives we have used several tools and techniques, some of which are CPM, PERT, estimating techniques, etc Project cost planning processes help in estimating the cost and creating the project budget. The major techniques used for this are PERT, cost aggregation etc.

5.8 Terminal Questions

1. 2. 3. Define Activity Sequencing process. What are the inputs for the cost estimating process? Explain the output of the schedule development process?

5.9 Answers to SAQs and TQs

SAQ I 1. Bottom-up 2. Defining project activities Sequencing the selected activities Estimating resources requirement for the project Estimating the time duration for each activity Creating schedule. Controlling schedule SAQ II 3. List of activities Activity characteristics Milestone list Organization List 4. Because in PDM, the activities are represented as rectangular boxes as nodes.
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SAQ III 5. PERT or Three-point estimate. 6. Activity Activity-01 Activity-02 Activity-03 Activity-04 Activity-05 SAQ IV 7. False 8. Compression SAQ V 9. Activity Cost estimate 10. Activity Activity-01 Activity-02 Optimist $1,000 $200 Most Likely $850 $175 Pessimist $700 $90 PERT 850 165 Pessimist 10 25 48 46 98 Most-likely 5 16 44 22 76 Optimist 3 9 39 15 54 PERT 5.5 16.34 43.84 24.83 76

Answers to Terminal Questions: 1. Refer part 5.3.2 2. Refer part 5.6.1 3. Refer part 5.5

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